Prices up on last year, but market remains subdued

● Average selling prices £4,000 (3.6%) higher than a year ago
● Property values virtually unchanged since 2010, but 12% below 2007 peak
● No sign of a recovery in transactions

Average selling prices are higher than they were a year ago, but about 12% below their peak

House prices in west central Scotland – which includes the country’s largest city, Glasgow – are £4,000 (or 3.6%) higher than they were this time last year. The average selling price in the area is now £128,500, up from £124,000 a year ago, but almost 12% below the 2007 peak of £145,000.

The increase is partly attributable to a sharp fall in prices in the autumn of last year and there was little change in prices from the second quarter to the third quarter of 2012. Over the last two years, average selling prices have fluctuated from one quarter to the next, but the overall effect has been little or no change. Selling prices now are almost exactly what they were at the start of 2010.

Selling times – a key indicator of market conditions – are broadly the same as they were in the autumn of 2011. The average selling time for a property today is 119 days, compared to 116 days a year ago.

Annual house price inflation (the difference between prices now and a year ago) is in positive territory, but flucuations are likely to persist

Transaction numbers remain subdued and there is no sign of an imminent recovery in activity. Sales in the last quarter were only marginally ahead of the same time last year and the sharp increase in sales recorded in the first few months of 2012 has not been sustained.

According to Professor Gwilym Pryce of Glasgow University, who analysed the sales data from GSPC: “The picture for the West of Scotland remains relatively unchanged as far as the housing market is concerned.

“There are no obvious prospects for a change in the foreseeable future, largely because the wider economy continues to stagnate at close to zero growth, and the housing market is so dependent on labour markets and wider economic activity. Hopefully, economic growth, employment and house prices will gradually recover as the wider economic situation eventually brightens.

From my point of view, it is normal to have an extended period of relative price stability in response to a recession – and that is exactly what we are seeing now. There will almost certainly be fluctuations in selling prices from quarter to quarter, but it is unlikely that we will see any sustained change either upwards or downwards for some time.

Average selling prices quarter by quarter since 1999

The shortage of homes coming on to the market has supported prices and offset the effect of limited mortgage availability. We expect that the Funding for Lending scheme will gradually improve the supply of mortgages and so increase demand from buyers. As it becomes clear that this is happening, we think a significant number of frustrated sellers to put their home on the market, so increasing supply. The overall effect will be broad price stability for some time.

The number of transactions remains low, around half those seen at the peak of the market, and we believe that there is a significant group of frustrated home movers who will want to sell and buy as soon as market conditions improve. Until then, greater market stability, particularly in terms of prices, should make moving easier and less stressful.